WEBVTT - Robinhood CEO Vlad Tenev Talks Prediction Markets

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>We're going to stay with robin Hood because the company

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<v Speaker 2>this week rolled out updates to was AI assistant and

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<v Speaker 2>prediction market offerings. In fact, prediction markets are now Robinhood's

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<v Speaker 2>fastest growing product line by revenue, with analyst at Citizens

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<v Speaker 2>expecting fivefold growth by twenty thirty. So joining us live

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<v Speaker 2>on the heels of that announcement is the CEO of

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<v Speaker 2>robin Hood, Flat Teneve and my Bloomberg Crypto co host

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<v Speaker 2>Tim Senwik joins us now as well. Loatt, It's great

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<v Speaker 2>to speak with you, and I want to start with

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<v Speaker 2>these sports wagering capabilities that you've added to your suite

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<v Speaker 2>of offerings. Here these preset combination contracts for professional football

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<v Speaker 2>games NFL games. It sounds like this is your version

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<v Speaker 2>of parlays that are offered by traditional sportsbooks. So what

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<v Speaker 2>is the difference between a combination trade and a parlay?

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<v Speaker 3>Yeah, So, as you mentioned, this is part of our

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<v Speaker 3>big unveil of prediction markets, which we've offered for a

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<v Speaker 3>little bit over a year. But remember we started with

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<v Speaker 3>just one prediction market on the platform, which was the

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<v Speaker 3>presidential election in twenty twenty four and Since then, we've

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<v Speaker 3>gone to over one thousand, five hundred contracts on the

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<v Speaker 3>platform across pretty much every domain. We've got politics, we've

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<v Speaker 3>got world affairs, economics, culture, and we recently added weather,

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<v Speaker 3>and of course, as you mentioned, sports. So I think

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<v Speaker 3>the major innovation here and why it's been so disruptive

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<v Speaker 3>to the sports industry is you can take the general

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<v Speaker 3>prediction markets infrastructure, which are markets that trade on regulated

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<v Speaker 3>exchanges where buyers and sellers are matched, and apply them

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<v Speaker 3>to pretty much everything. Now. Of course sports is an

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<v Speaker 3>important subset of that because there's an existing large market there.

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<v Speaker 3>But we see a world where we're actually the percentage

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<v Speaker 3>of nonsports contracts grows much faster than sports, and I

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<v Speaker 3>think several big industries are likely to be disrupted in

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<v Speaker 3>the future, things like insurance. You can imagine with the

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<v Speaker 3>weather contracts we have on a platform. People have already

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<v Speaker 3>pointed out that, you know, trading and hedging with a

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<v Speaker 3>insurance weather contract could be superior to buying traditional insurance

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<v Speaker 3>through a broker. So as the market matures and you

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<v Speaker 3>see increased in institutional participation, I think we could be

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<v Speaker 3>at the very beginning of a prediction market supercycle. With

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<v Speaker 3>growth in volumes and enlisted contracts accelerating from here.

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<v Speaker 2>Well, we've had a few incidents now of alleged insider

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<v Speaker 2>trading in prediction markets. Do you think insider trading poses

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<v Speaker 2>a risk to fairness in prediction markets or could help

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<v Speaker 2>ensure market accuracy by allowing those with privileged information to participate.

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<v Speaker 3>Well, I'm not exactly sure which incident you're referring to.

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<v Speaker 3>There was an incident in the sports betting space, which

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<v Speaker 3>is entirely differently regulated, right, those are regulated on a

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<v Speaker 3>state by state basis, and I think they're obviously working

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<v Speaker 3>hard to address these issues. But what I tell you

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<v Speaker 3>is financial markets have had the infrastructure in terms of

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<v Speaker 3>surveillance and monitoring to deal with these types of concerns,

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<v Speaker 3>and they've been dealing with it for decades. Because obviously,

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<v Speaker 3>insider trading originated as a market integrity measure for the

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<v Speaker 3>equities market. We want to make sure we have protections

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<v Speaker 3>as an industry to make sure corporate insiders and other

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<v Speaker 3>folks weren't using their privileged information about what a company

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<v Speaker 3>was going to release to trade ahead of that disclosure

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<v Speaker 3>being available publicly. So this has pretty much always been

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<v Speaker 3>a financial markets thing, and so I think financial markets

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<v Speaker 3>have the best tools to deal with it.

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<v Speaker 1>Glad, I'm wondering about prediction markets, and specifically Robinhood and

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<v Speaker 1>others too, if they offer enough protections to consumers against

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<v Speaker 1>addictive betting, how do you solve for that? At Robinhood, I.

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<v Speaker 3>Mean, I think our philosophy is, if you look at

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<v Speaker 3>prediction markets, there's a tremendous amount of value in the

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<v Speaker 3>diversity and variety of contracts and what we're actually seeing,

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<v Speaker 3>similar to trading, a lot of people that actually have strategies,

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<v Speaker 3>So it's not you know, it's not as much of

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<v Speaker 3>like I'm buying a team because I'm a fan of it,

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<v Speaker 3>But there's systematic trading and people are analyzing these things

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<v Speaker 3>and they have strategies around it, and it goes beyond sports.

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<v Speaker 3>You guys were mentioning the Warner Brothers merger situation. If

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<v Speaker 3>you notice the question on everyone's mind is what's likely

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<v Speaker 3>going to happen to Warner Brothers. Who's going to acquire

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<v Speaker 3>the company? Is it going to be Netflix or Paramount,

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<v Speaker 3>Skuidance or neither of the above. And right now, we

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<v Speaker 3>look at the stock prices right and we try to

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<v Speaker 3>reverse engineer. What's happening with the situation. Well, there's a

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<v Speaker 3>prediction market that we illustrated on the platform, and you

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<v Speaker 3>can see last night it was showing fifty five percent

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<v Speaker 3>chance Paramount would actually be the ultimate acquier. This morning

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<v Speaker 3>it went to seventy five percent. Netflix. So even in

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<v Speaker 3>terms of what value they provide to the news, it

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<v Speaker 3>can be incredibly powerful and more direct to zero in

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<v Speaker 3>on the results of that specific outcome. And now I'm

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<v Speaker 3>not saying everyone should be trading prediction markets any derivatives market.

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<v Speaker 3>I think people have to make sure it's right for them.

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<v Speaker 3>But I think they're resonating quite strongly with our active traders,

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<v Speaker 3>and also I think they're a great way for other

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<v Speaker 3>folks who may be interested in trading to learn about

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<v Speaker 3>the new asset class.

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<v Speaker 1>It's an incredibly competitive space, flat, I don't need to

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<v Speaker 1>tell you that, and you have companies and people being

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<v Speaker 1>minted billionaires as a result of the competitive space. Right now,

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<v Speaker 1>I'm wondering about the dynamics and how you view the

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<v Speaker 1>competitive dynamics and whether you have an edge after acquiring

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<v Speaker 1>ledger X. Talk about that a little bit.

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<v Speaker 3>Yeah, I mean, right now we're the largest broker in

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<v Speaker 3>the space, and actually the brokerage landscape is not very competitive.

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<v Speaker 3>I mean, we're pretty much the only game in town

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<v Speaker 3>in terms of the exchanges offering prediction market services. I

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<v Speaker 3>think there's a big argument to be made for this

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<v Speaker 3>to be an increasingly institutional business over time. In the

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<v Speaker 3>same way that crypto markets started off being exclusively retail

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<v Speaker 3>and have sort of like built up institutional adoption over time,

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<v Speaker 3>I think you can make a perhaps even stronger argument

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<v Speaker 3>that the same is going to happen with prediction market

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<v Speaker 3>event contracts. If you just look at the trillions that

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<v Speaker 3>are being used are being deployed into interst rate futures

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<v Speaker 3>and swaps to hedge interest rate risk by institutions, prediction

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<v Speaker 3>markets offer a way more direct mechanism for actually hedging

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<v Speaker 3>that risk. So our acquisition, our partnership with SIG to

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<v Speaker 3>acquire ledger x, I think is a way for us

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<v Speaker 3>to tap into what we believe will be a growing

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<v Speaker 3>institutional market for this asset class. And if you couple

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<v Speaker 3>that with our broad retail reach, I think that positions

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<v Speaker 3>well to continue growing with the space, if not faster

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<v Speaker 3>than the aggregate growth in the sector.

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<v Speaker 1>What's the effect that that acquisition has on. Let's say

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<v Speaker 1>call Schaef for example, that is a partner of yours

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<v Speaker 1>right now, but also a competitor.

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<v Speaker 2>Yeah.

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<v Speaker 3>I mean the more prediction market exchanges join the market,

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<v Speaker 3>the more price competition there is, right, and we see

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<v Speaker 3>a world where it's increasingly multipolar. I think there's going

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<v Speaker 3>to be multiple dozens prediction market exchanges, and I think

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<v Speaker 3>that will lead to a great outcome for ultimately the

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<v Speaker 3>traders in the space, because the more exchanges there are,

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<v Speaker 3>the more we put pressure on the transaction fees and

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<v Speaker 3>get them to be close to rock bottom. And what

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<v Speaker 3>happens is more liquidity comes into the space, more institutional interest,

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<v Speaker 3>and prices go down. And as with any ass at,

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<v Speaker 3>you know, crypto equities options Robin who is just focusing

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<v Speaker 3>on providing the best execution for customers. So we connect

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<v Speaker 3>to a wide variety of exchanges and market centers to

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<v Speaker 3>facilitate that.

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<v Speaker 2>A lot for a lot of people, it's not clear

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<v Speaker 2>what the difference is between prediction markets and outright gambling.

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<v Speaker 2>Are you concerned about potential hit to volumes if you're

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<v Speaker 2>forced to exit certain states over conflicts with gambling regulators.

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<v Speaker 3>Yeah, I think a lot of times this discussion of

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<v Speaker 3>you know, is it trading or gambling gets into sort

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<v Speaker 3>of a debate on the meetings of words. But one

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<v Speaker 3>clear benefit of prediction markets is that these contracts are

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<v Speaker 3>traded on regulated exchanges where buyers and sellers meet together.

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<v Speaker 3>And essentially this has a lot of downstream effects, right.

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<v Speaker 3>One of them is you get a wide variety of

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<v Speaker 3>contracts being offered. You know, we've gone from one to

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<v Speaker 3>thousands in the past year. You could see a world

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<v Speaker 3>where it gets to tens of thousands and hundreds of thousands,

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<v Speaker 3>and pretty much any event could be priced in real

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<v Speaker 3>time and tradeable. The second is because these happen on

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<v Speaker 3>an exchange where buyers and sellers meet, our incentives aren't

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<v Speaker 3>to trade against our customers, and that's how a lot

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<v Speaker 3>of these you know, state regulated operators run. Their business

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<v Speaker 3>model is not to exchange orders. It's actually to trade

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<v Speaker 3>against the customer, which basically you know, and they kind

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<v Speaker 3>of jiu jitsu around this when when they get asked,

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<v Speaker 3>but there they make money when their customers lose. Our benefit.

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<v Speaker 3>Our incentive as a business is to bring on customers

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<v Speaker 3>and have those customers account balances grow steadily and monotonically

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<v Speaker 3>over time. So I think we're actually incentive to grow

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<v Speaker 3>with our customers, and that leads us to offering a

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<v Speaker 3>wide variety of products for them to invest and trade in,

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<v Speaker 3>not just prediction markets, which are enticing to bring new

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<v Speaker 3>people in, but also things like Robinhood strategies, retirement, the

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<v Speaker 3>Cortex AI tools that are continuing to proliferate throughout the platform.

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<v Speaker 2>Yeah.

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<v Speaker 3>So our vision is, really, can we build a financial

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<v Speaker 3>super app where all of your financial needs are met

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<v Speaker 3>in one place and all of your all of your

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<v Speaker 3>finances are managed to the best of our ability at Robinhood.

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<v Speaker 2>Well, speaking of all financial needs, there's a lot of

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<v Speaker 2>chatter on Trump accounts for kids, where the government seeds

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<v Speaker 2>investment accounts with one thousand dollars for children as part

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<v Speaker 2>of the One Big, Beautiful Bill. Are you still positioning

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<v Speaker 2>yourself for consideration? Have you heard who else might be

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<v Speaker 2>in the running?

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<v Speaker 3>Yeah? Well, I've spoken to the President and obviously the

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<v Speaker 3>government about this personally, and basically, while we can't give

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<v Speaker 3>you the details of what we're involved in or what

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<v Speaker 3>we're talking about, I think this is incredibly important. I

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<v Speaker 3>think we have a huge risk in this country of

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<v Speaker 3>people not believing in the free markets and in the

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<v Speaker 3>financial system because they don't have skin in the game.

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<v Speaker 3>I think it's especially a problem now when we're in

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<v Speaker 3>this massive wave of AI driven disruption. So you know,

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<v Speaker 3>you're seeing AI products being adopted at an accelerating rate,

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<v Speaker 3>but at the same time AI being generally unpopular because

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<v Speaker 3>people are pretty pretty worried about what impact it's going

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<v Speaker 3>to have on them and their jobs. And I think

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<v Speaker 3>the best way to actually counteract this is from an

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<v Speaker 3>early age, give people a stake in what's being built

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<v Speaker 3>in the great industries of this country. So I think

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<v Speaker 3>it's a great initiative, and we've assured them that we're

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<v Speaker 3>standing ready to help in the maximum way possible.

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<v Speaker 1>To Scarlett's point, Ray Dalio's going to donate to Trump

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<v Speaker 1>accounts and Connecticut Blackrock is going to match Trump account

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<v Speaker 1>contributions for employees. A lot of companies are wondering if

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<v Speaker 1>their companies are going to do it, any plans to

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<v Speaker 1>do that for Robinhood employees.

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<v Speaker 3>I think we're thinking of a lot of things, and

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<v Speaker 3>what I'm mostly interested in is, you know, obviously not

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<v Speaker 3>to downplay Robinhood has thousands of employees, but I think

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<v Speaker 3>our value is we serve tens of millions of customers

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<v Speaker 3>in the US and we've got you know, over a

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<v Speaker 3>third of a trillion in assets on the platform, So

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<v Speaker 3>we're sort of like thinking bigger, like how can we

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<v Speaker 3>help every single company and every single individual in this

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<v Speaker 3>country plug into the system. Of course we're interested in

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<v Speaker 3>thinking for our employees, but the impact of that is

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<v Speaker 3>like relatively low when it comes to the whole country,

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<v Speaker 3>and we're really thinking about how can we help the

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<v Speaker 3>whole country and this program be as successful as possible.

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<v Speaker 1>Heyfa, before we let you go, I want to talk

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<v Speaker 1>a little more about the core tech AI offering and

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<v Speaker 1>what you're trying to build in this financial super app

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<v Speaker 1>at Robinhood. If you think about this from the perspective

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<v Speaker 1>of and you made clear you don't want this to

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<v Speaker 1>be an advisor by any means, but you want people

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<v Speaker 1>to be able to ask questions to the app about

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<v Speaker 1>different stocks or help find stocks. How is it powered, Like,

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<v Speaker 1>what is the AI that powers core techs AI, how

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<v Speaker 1>is it trained? And what's the underlying model that you're using.

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<v Speaker 3>Yeah, so it's an agentic system, which maybe you guys

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<v Speaker 3>have heard this buzzword before, but it's not actually just

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<v Speaker 3>purely the underlying models. We use a variety of models

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<v Speaker 3>under the hood to power different You can think of

0:14:51.960 --> 0:14:56.480
<v Speaker 3>them as experts on our platform. And I think the

0:14:56.520 --> 0:15:00.840
<v Speaker 3>big advantage that we have when you compare it you say, Chat,

0:15:00.880 --> 0:15:06.080
<v Speaker 3>GPT or other lms or agents, is we have not

0:15:06.240 --> 0:15:10.000
<v Speaker 3>just the personal information about customers and their accounts and

0:15:10.000 --> 0:15:13.480
<v Speaker 3>their activity with us, but we also have real time

0:15:13.560 --> 0:15:18.120
<v Speaker 3>market data across multiple assets streaming into the system, and

0:15:18.160 --> 0:15:21.640
<v Speaker 3>that allows us to actually ground the information we provide

0:15:22.960 --> 0:15:25.640
<v Speaker 3>with a high degree of accuracy. So now we can

0:15:25.680 --> 0:15:28.880
<v Speaker 3>tell you not just the real time prices for stocks,

0:15:29.400 --> 0:15:33.800
<v Speaker 3>but also real time predictions and what's likely to happen

0:15:34.080 --> 0:15:39.200
<v Speaker 3>around thousands of real world events. So you can imagine

0:15:39.240 --> 0:15:42.760
<v Speaker 3>all of this is culminating into if you're a customer

0:15:42.760 --> 0:15:48.120
<v Speaker 3>of Robinhood, you no longer have to rely on external

0:15:48.160 --> 0:15:52.720
<v Speaker 3>sources for the inspiration and the idea behind a trade.

0:15:52.840 --> 0:15:54.800
<v Speaker 3>It used to be that Robinhood is pretty much just

0:15:54.840 --> 0:15:59.440
<v Speaker 3>a tool to execute the trade, but now the goal

0:15:59.560 --> 0:16:02.680
<v Speaker 3>is to actually help you with the research, the idea,

0:16:02.880 --> 0:16:07.560
<v Speaker 3>generate the inspiration behind the trade and prediction markets Cortex

0:16:07.960 --> 0:16:11.400
<v Speaker 3>and Robinhood's social which is a new social network we

0:16:11.480 --> 0:16:14.200
<v Speaker 3>unveiled at Hoods Summit a couple of weeks ago. Are

0:16:14.240 --> 0:16:18.520
<v Speaker 3>all converging to drive this evolution and what Robinhood is becoming.

0:16:19.080 --> 0:16:22.480
<v Speaker 2>So Cortex is going to be available to your Gold subscriber,

0:16:22.560 --> 0:16:24.440
<v Speaker 2>so it sounds like it's a premium service. They'll be

0:16:24.480 --> 0:16:28.280
<v Speaker 2>paying an additional fee to get these tools. Do you

0:16:28.400 --> 0:16:30.800
<v Speaker 2>plan to launch any kind of basic version.

0:16:30.600 --> 0:16:35.720
<v Speaker 3>Of this, you know, we're thinking about that. Like Cortex

0:16:35.840 --> 0:16:40.040
<v Speaker 3>and Robinhood Gold in general, it is a subscription service,

0:16:40.080 --> 0:16:43.080
<v Speaker 3>but it's very accessible. So it starts at five dollars

0:16:43.160 --> 0:16:47.680
<v Speaker 3>a month, fifty dollars for the year, and we've seen

0:16:47.880 --> 0:16:50.800
<v Speaker 3>that over a third of customers that sign up to

0:16:50.880 --> 0:16:55.320
<v Speaker 3>Robinhood on a quarterly basis actually adopt the Gold subscription

0:16:55.640 --> 0:17:00.640
<v Speaker 3>relatively quickly. So we see a world where the attachmate

0:17:00.720 --> 0:17:05.040
<v Speaker 3>of our Gold subscription offering goes up even more and

0:17:05.480 --> 0:17:10.440
<v Speaker 3>it really rivals the attachmates of the leading subscription offerings

0:17:11.400 --> 0:17:14.680
<v Speaker 3>industry wide, not just financial services, but also you look

0:17:14.720 --> 0:17:20.080
<v Speaker 3>at music streaming video and I think we can be

0:17:20.080 --> 0:17:23.639
<v Speaker 3>best in class there. So of course, nothing said in stone.

0:17:23.680 --> 0:17:26.160
<v Speaker 3>We're going to continue to iterate. We might end up

0:17:26.200 --> 0:17:30.479
<v Speaker 3>with as you suggest, a basic version, but right now

0:17:30.720 --> 0:17:34.920
<v Speaker 3>we're not seeing any bottlenecks to adoption of Cortex from

0:17:34.920 --> 0:17:35.760
<v Speaker 3>the Gold subscription.

0:17:36.160 --> 0:17:39.040
<v Speaker 2>All right, good stuff, Vlad. Really appreciate your joining us today.

0:17:39.160 --> 0:17:41.720
<v Speaker 2>Lad ten Of is Robin Hood CEO, and I also

0:17:41.760 --> 0:17:45.480
<v Speaker 2>want to thank my co host. I'm Bloomber Crypto Tim Stenovik.